Continental Resources, Inc.

Good day ladies and gentlemen and welcome to the Continental Resources, Inc. second quarter 2021 earnings conference call. At this time all participants are in a listen only mode. Later we will conduct a question and answer session and instructions will follow at that time. Should you need assistance please signal a conference specialist by pressing the star key followed by zero. As a reminder this conference call is being recorded. I would now like to turn the conference call over to Rory Sabino, Vice President of Investor Relations. Please go ahead.

Great. Good morning, and thank you for joining us. Welcome to today's earnings call. We will start today's call with remarks from Bill Berry, Continental's Chief Executive Officer, and Jack Stark, President and Chief Operating Officer. Bill and Jack will be joined by additional members of our team, including Mr. Harold Hamm, Chairman of the Board, John Hart, Chief Financial Officer and Chief Strategy Officer, and other members of our team. Today's call will contain forward-looking statements that address projections, assumptions, and guidance. Actual results may differ materially from those contained in forward-looking statements. Please refer to the company's SEC filings for additional information concerning these statements and risks. Continental does not undertake any obligation to update forward-looking statements made on this call. Finally, on the call, we will refer to certain non-GAAP financial measures. For a reconciliation of these measures to generally accepted accounting principles, please refer to the updated investor presentation that has been posted on the company's website at www.clr.com. With that, I will turn the call over to Mr. Berry. Bill?

Thank you, Rory, and good morning, everyone. Thank you for taking time to join us on our call. I hope everyone is well. I'd like to begin by highlighting our exceptional performance in the second quarter where we generated robust and company record-breaking free cash flow thanks to strong asset performance in addition to continued capital and operating efficiency gains delivered by our teams. This significant free cash flow is being dedicated to shareholder capital returns in the form of an increased quarterly dividend to 15 cents per share, continued focus on debt reduction and resumption of our $1 billion share repurchase program. We appreciate our investors' support and hope this continues to provide confidence in Continental being the best investment opportunity in the industry and the most shareholder return-focused company in any industry. During the second quarter, we generated a company record-breaking $634 million of free cash flow. reduced net debt by $284 million, ending the quarter with $4.59 billion. Year-to-date, we've generated $1.24 billion in free cash flow while reducing our net debt by $892 million. We distributed $40 million to shareholders with our previous 11-cent quarterly dividend, exceeded our production guidance for the quarter, delivering 167,000 BOE a day, and just over barrels of oil a day and just over 1 billion cubic feet of gas per day. We delivered exceptional performance and efficiencies from our assets in the Bakken and Oklahoma, which Jack will provide more details. With respect to hedging, we remain unhedged on crude oil. On gas, we have about approximately 50% of our volume hedged through year-end with a combination of swaps and collars that provide a floor around three, while we're retaining price upsides of over $5. For 2022, we have no gas hedges beyond the first quarter and no oil hedges at all in 2022. While we remain bullish on commodity prices given the volatility of price cycles and potential impact of and government reaction to COVID variants, we continue to believe it is inappropriate for the industry to overproduce into a potentially oversupplied market, particularly with respect to crude oil. As I highlighted last quarter, we remain focused on our strategic vision with four key elements I'd like to briefly discuss today. Free cash flow commitment, capital discipline, strengthening the balance sheet, and corporate and cash returns to shareholders. Let me start with our commitment to free cash flow and capital discipline. Our cash flow generation is robust and competitively advantaged versus our peers, given our unhedged crude oil profile as shown in slide four. In the first half of the year, we have, year to date, already generated the free cash flow we were projecting for the entirety of 2021. We are now seeing the potential to generate approximately $2.4 billion of free cash flow at current strip prices this year, which equates to an approximately 19% free cash flow yield. Given our disciplined response to rising commodity prices, our CapEx budget for 2021 has not changed, and our reinvestment rate is trending toward 35%. With regard to strengthening the balance sheet, our net debt reduction is tracking toward $1.8 billion in 2021, which will bring our year-end net debt close to $3.7 billion. We expect to meet or exceed our leveraged target of one-time net debt to EBITDA this year, but are not finished there. Our intention is to reduce absolute debt to one-time at $50 to $55 WTI, which equates to approximately $3 billion in debt. Alongside our strong inventory and commodity optionality, we are confident our net debt outlook is one of the many powerful attributes for both the company and our shareholders. And we believe our current credit metrics are reflective of investment grade. So let me now discuss corporate returns and cash returns to investors. We're generating strong Corporate returns are projecting to deliver 18 percent return on capital employed in 2021. Additionally, we are committed to disciplined and significant shareholder returns through net debt reduction and prioritizing cash returns using the multiple vehicles we have to return cash to investors, including our dividend and share repurchases. We are committed to growing our dividend in a competitive and sustainable manner. That is why we increased our quarterly fixed dividend by 36 percent versus last quarter. to 15 cents a share. This is triple our original dividend rate and equals to an approximately 1.7 annualized dividend yield, which we believe is competitive with industry peers and shows ongoing growth in cash returns. We are resuming our share repurchase program of $1 billion, which began in 2019 with $317 million of purchases previously executed, $683 million of capacity remains. Given our significant shareholder alignment, you can be confident that shareholder capital returns will remain a significant priority for our company. The combined shareholder capital returns in the form of the annualized dividend and projected net debt reduction by year in 2021 alone would equate to 53% of the company's projected full year 2021 cash flow from operations and 16% of the current company's current capital market. Share repurchases would be additive to these figures, depending on the timing of additional share repurchases, which we expect to be in the near future. 2021 guidance updates. Let me share with you a little bit of where we are on that. As we look ahead to the remainder of 2021, several of our key metrics are materially outperforming our original guidance, such that we have updated for the following. Natural gas production in 2021 is now expected to range between 900 million and one BCF a day. Production expense is projected to be $3 to $3.50 per BOA, better than the original guidance of $3.25 to $3.75. Additionally, as reflected on slide 16, we have improved our guidance on DDNA and crude and gas differentials. I also want to highlight our continued focus on ESG. We recently released our 2020 ESG updates, which can be found on our website, www.cit.clr.com. ESG has always been a key part of our DNA and something we have highlighted as a means to steward our company. While there is a lot of focus on the environmental, or E, from all of us, we believe the S, societal, is underrepresented in the global dialogue. A lack of energy access across the world equates to poverty, which all members of society should seek to improve. Our ESG efforts remain focused on continuously improving, and our approach is to look at all operational impacts, including land, water, and air. We believe it is essential all countries and all economic participants do their part to improve ESG in the same way in order to better our world. Crude oil and natural gas will continue to play a vital role in the global energy mix, and the entire world needs multiple forms of energy to move people from poverty to appropriate levels of societal quality of life. In closing, I did want to provide an update on the launch of the new futures contract, Midland WTI American Gulf Coast, which will start trading on the Intercontinental Exchange by year end. This is a culmination of recommendations by the AGS Best Practices Task Force, led by Harold Hamm, along with efforts by Magellan and Enterprise Products, and will be an exciting opportunity for U.S. producers seeking greater transparency, more liquidity, and access to global markets. I'll now turn the call over to Jack to discuss our operational performance.